ImpactAlpha, Aug. 26 – Nick Hurd, the former MP and government minister, is heading the Impact Taskforce, created under the U.K.’s presidency of the G7. The Global Steering Group for Impact Investment has pulled together more than 100 agents of impact to generate solutions for a sustainable and inclusive recovery from COVID-19, including U.N. special envoy Hiro Mizuno, Courageous Capital’s Laurie Spengler, LeapFrog’s Andrew Kuper, JUST Capital’s Martin Whittaker and Generation Investment Management’s David Blood.
Mobilizing markets and the private sector for solutions to social and environmental challenges “has become more politically relevant than I have ever known it,” says Hurd, now chair of Access Foundation, which helps charities and social enterprises generate earned income and promotes blended capital models.
In a Q&A with ImpactAlpha, Hurd says the COVID crisis has created a window of opportunity. “Doors and minds are more open than they ever have been to some of the arguments the impact movement had been making for quite some time.”
ImpactAlpha: Give us some context for the impact taskforce that was just announced.
Nick Hurd: There’s a very strong sense that we have a moment here, both in terms of the political window of opportunity to argue for change and acceleration but also in terms of some of the tail winds that are driving behavior in corporations and institutional investors. Our argument to the British government was, look, the context has changed with the COVID crisis and the clear and present crisis around climate change. You and other world leaders are stepping out to make some very big commitments around net zero, a just transition and green and inclusive recovery, all of which carry very big and heavy investment requirements. There was a funding gap before COVID documented around the SDGs, and that gap has widened significantly since. And the public sector, your governments, are in a worse position than you were before, in terms of your balance sheet.
So this question of how we mobilize the markets and the private sector at scale for public good, to be a more visible and effective force in helping to find solutions for the social and environmental challenges in front of us, has become more politically relevant than I have ever known it.
What was striking for me was how receptive the government was to that message. It wasn’t a difficult sell. That just confirmed in my mind that politically, doors and minds are more open than they ever have been to some of the arguments the impact movement had been making for quite some time.
ImpactAlpha: It’s quite a large task force. How do you keep it from becoming unwieldy?
Hurd: It is a large task force. It’s structured in the following way: it has a steering committee that is responsible for the overall strategic message and the recommendations of the taskforce. That combines country representatives with representative from some of the most
relevant multilateral institutions in this space. We’ve gone beyond the G7 in inviting representations from countries that feel very important in this transition such as India, South Korea, Africa. And then we’ve got expert advisors, people who’ve run large corporations, people who are impact entrepreneurs, people who are specialists, impact investors, people who represent big mainstream institutions that are increasingly pivoting to impact.
We also have two working groups, one led by Doug Peterson, president & CEO of S&P Global, that is looking at impact measurement and transparency. And the other, led by Dame Elizabeth Cooley, chair of the UK Investment Institute, is looking at tools and vehicles that will allow for mobilization of impact investment at scale, with a particular lens of what is needed to deploy in emerging economies and emerging markets. And there are technical groups that are really advancing the work. And this big pool of very diverse perspectives and experience is there to provide insight and comment and help steer that work to a sort of coherent conclusion. It’s my job with the steering committee to put all this together into the most powerful narrative that we can in terms of both the thesis and the recommendations. We see our primary audience as being governments – the G7, G20 – but also private sector leadership, both corporate and investment institutions.
ImpactAlpha: As you say, it is a moment for action. Yet we’re still nowhere near where we need to be going into COP26. How many more wildfires and floods and IPCC reports will it take to get people to step up and do what needs to be done?
Hurd: We’re talking about climate change, and obviously there are a huge number of social issues connected to that. The COVID shock has shattered inertia, which is really important because inertia is the biggest barrier to system change. That has required us to think differently, has shown us that we are capable of doing things differently. I obviously look at it through a UK lens, but there are things that the government was able to do during the COVID crisis in terms of speed of decision-making, scale of decision making, different processes that were unthinkable. And so there is something around opening people’s eyes to the need to do things differently. If you do read through the G7 communique, and very few people have done this, you can pick up the undercurrent of concern that, as the richer economies recover from COVID quite quickly, there is a very real risk that already unacceptable levels of income inequality within countries and between countries will widen. And if you pile on top of that the inequalities underlying the impacts of climate change, which will impact the poorest countries, there is very real concern underpinning the green and inclusive rhetoric about making sure that gaps do not widen.
We can see the movements in the ESG market that’s telling us that some powerful winds are blowing that are changing behavior in boardrooms and boardroom priorities, so there’s something to harness here. We also need to challenge the perception that somehow that there is a trade-off between return and impact, and that somehow, for the big financial institutions, there is risk attached to their sense of fiduciary duty. So there’s quite a lot to unpack and dismantle and break down to kind of build the confidence in the change that is required. Part of the value of the taskforce will be in pulling together a picture of what is possible.
ImpactAlpha: I wonder how you are thinking about this work in terms of broader framing. We have a project around Reimagining Capitalism, for example. Are you looking at how we rethink not just our systems and our financial flows but some of our institutions that have been around for decades?
Hurd: It’s a fascinating point and I like the phrasing that you’ve used. We have framed this within the context of a clear political challenge around, how do we fill this very clear funding gap between what we’re committing to and our ability to to finance it, and how do we make sure that actually investment flows to the right destination. The bigger picture speaks more to the interests of the private sector, which is, there is a challenge to capitalism and a need to address some of the fault lines in our system for generating prosperity.
It’s striking to me how much change there has been. When I went to the UK parliament, I decided to focus on climate change back in 2004 or 2005, because I felt it was the biggest challenge facing my generation of politicians. But the debate now is in a completely different place than it was then and the private sector is in a completely different place than it was then, which demonstrates what is possible, but also some of the societal pressure that has been placed on businesses we invest in. We’re increasingly aware that what they’re doing has a cost. That’s a massive change in a decade.
The capitalist system is having to look hard in the mirror and address the fault lines – its cost to the planet and too many people being left behind. And private capital has to play its role in the response. The impact investment movement is critical to that, because it can’t be enough to settle for doing less harm. We really need to make it easier for private investments to proactively seek to combine return with positive impact, and it’s got to be done through demonstration and inspiration and clear visibility of opportunities. That’s why we set up the task force to look at the measurement piece, which is critical – you can’t value what you don’t measure. But also to look at what’s needed now, in terms of structuring of investment vehicles, the role of concessional finance and all the other elements that we know are important in terms of really creating the kind of large scale investment opportunities that offer a genuine opportunity to combine financial return with measurable, transparent impact, particularly in markets such as South Africa or India where the change is so critical.
ImpactAlpha: Tell me more about working group B’s efforts around structuring new models.
Hurd: I’m delighted that Laurie Spangler – she features regularly in your newsletter – is guiding and leading a lot of that work. Working group B is very much framed around deployment of private capital at scale to support the just transition, so they want to work through the key recommendations on principles of structuring vehicles. The end goal is to design a blueprint that could have some application in different geographic contexts to mobilize private capital at scale in support of the just transition. Obviously in this context the role of the DFI (development finance community) community, the role of those in a position to take on levels of risk is really important. It’s quite refreshing to see a stream of work that is aiming to deliver something very practical for government and practitioners in some really important markets. We hope that the end result will be real finance platforms and vehicles deploying real money, built on the learning of what works and what doesn’t work.
ImpactAlpha: What is the tie-in to the Conference of Parties in Glasgow in November? Your timing is post-COP for any real recommendations, but clearly this work is very important for discussions that will be going on there.
Hurd: I’m a former climate change minister and have sat round the tables where the $100 billion has been debated and discussed. The whole question of mobilization of investment is a critical part of the COP dynamic, and I’ve spoken regularly to Nigel Topping, the British high-level champion for COP, and this is a huge issue for him. Our destination is probably to launch a final report with the task force after COP, but we will be working internally to consider the opportunity to look at the work as it develops and the opportunity to extract what is most COP-relevant, as it were, and discuss with the British government, as the presidency of the COP as well as the G7, the opportunity to share any kind of preliminary insights that may be relevant to the COP.
ImpactAlpha: Thanks. And do keep us posted!
This interview has been edited for length and clarity.